股市估值、貨幣槓桿和政經宏觀

原刊於 2009.05.23

按：這貼很精彩，節錄部份如下。
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價值人問：「其實有乜野支持大家係冇基本支持下肯大手入貨長坐？」
來源：http://www.inv168.com/phpBB3/viewtopic.php?f=21&t=52233

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價值人：

以我自己而言必定核心穩定, 息率可觀, 否則揸住根本冇信心死守...甚至冇覺好訓

有時我好佩服o的賭仔, 大大手o甘入d字花去賠個莊長坐, 究竟有乜野支持d人可以係o甘o既情況長揸, 係o米真係冇深究過o個d係乜來 ??? o甘賭性要好重先得

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人之初：

股市去求富，在當時機唔o岩，在自己運又唔就時，o係欲速則不達o架。

股，幾時都可以炒，但我o地老散，要自己練就幾時都有危機感！！(用乜方法？就要自己去悟、去學)

我o地老散o既本，本來就唔多，出來獵食，就等如自己玩game時，自己o既生命值，唔come得俾d大魔頭，中魔怪，中招得幾多次的。

感覺一唔對路，老散就要識忍、識閃，保存自己o既一定實力，係好重要o既保本之道！！

就算睇錯市而逃，唔緊要的，最多贏少o左，或輸dd。好多老散，就死在唔識逃跑呢招！！

我o地老散，要明白、學識：走鬼係光榮，暫時小輸唔係恥辱呢o個理念o架！！

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價值人：

美元美股一行大反轉 (美元美股 齊跌) 係極危險訊號

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價值人：

如果今次出現 stagflation, 資產市場已炒到去垃圾水平(now @ 1973), 導致o的錢寧願留係民生谷高消費品, 而家已經有o甘o既現象出現 (人心深信熱錢炒垃圾, 只有極小部份人賭性達到100% 全身投入)

經濟愈來愈差, 因人工下降, 收入更大比率用來應付生活開支, 甚至要從資產市場套現

七十年代式....最後集体懺悔(狂挾息)決定 Fiat生死

Now @ 1973, 2007 救毒工廠 = 1971 放棄金本位

時間表 約 2010-11 行Glass steagall, 2015-16 唔掂就狂加息到20厘

人性貪婪以為昆完人先 hyperinflation, 好似1973 o甘, 結果化灰1/10, 搞到1974要跳樓

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價值人：

最近有d hedge fund o既 data, 2009-5月 hedge fund 已去到頂峰期的約8成 (1.5T/1.95T)

但係一個復原期以o甘快o既速度再玩 over-leveraging, 8成已差不多係極限

最近美元的弱勢, 尤其兌GBP(最糟的貨幣), 証明hedge fund 已有能力以熱錢煲起一隻垃圾貨幣

obama好明顯已知不妙

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價值人：

Obama obama

你印出來o的錢 班賊只會送晒出去別國口代瘋狂炒作, 炒番起美國樓...發夢la

美國??? 因為冇回報 資金高速鬆人....死得更快

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價值人：

Deleveraging 1st round 落過 650

如果 glass steagall 100% fully deleveraging, 有一炮要捱的

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價值人：

冇用的, 唔比美國人自己買 大中華威力基金

要資金自動流入美國永遠只得一個辦法, 亞洲仆街

90年代初的日本沉歿 ==> 91-97非理性亢奮
1997-1998 AFC ==> 1999-2000 TMT
2001-2003 亞洲低迷 ==> 2001起的美國炒樓潮

亞洲不死, 美國今次必亡

人類天性貪婪追求 high return, 錢只會o甘樣流法, stable vs high return (資金 ==> high return), stable vs negative return (資金 ==> stable)

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凌天羽：

前者: stable vs high return (資金 ==> high return), 結果大家都買晒威力基金

後者: stable vs negative return (資金 ==> stable), 結果係走晒去黃金呢d 資金避難所

要亞州仆街前題係需要隊爆人仔令佢可以自由兌換同浮動匯率,
呢一樣野阿爺而家仲係死都唔制......如果佢一放手, 就會仆街



同埋一下子講到咁大做乜丫, 而家連地區戰爭都未開打, 大部份小國都仲未出事.
總力戰既發展永遠係一級級咁升的, 燒到咁上下之後至會開大戰的.

1997 afc 都係一級一級由最容易既開始燒, 最後至燒到香港的

升級到亞洲仆街之前, 西方自己都要先爆幾個國家先燒到最後boss .... 中國
爆到中國果時, 什麼金磚x 國可能己經死左好世耐了......

美國民主制度講既係"美國利益", 總統都係根據呢一樣野行事的
Obama 佢唔係蠢, 佢同佢既幕僚肯定有考量過如果係為左爆亞洲令咁多金磚國家都爆晒,
會有乜野後果. 美國會唔會被果堆國家集體響聯合國圍攻都估唔到.

呢一局棋, 很精彩

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價值人：

好簡單, 一條 glass steagall act, 全地球 hedge fund 即時收乾

"所謂 high growth" 的地方一冇水...冇得熱錢炒垃圾, 就回歸 fundamentals

以 fundamentals計, 香港個市值幾多?? 心照la

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價值人：

美國忍唔住今晚又用 o個300B 來買番d債去頂個市

而家變了 債跌 + 美元跌 ==> 股跌 / 債升 + 美元跌 ==> 股升, 似乎美元係長跌 但一有 deleveraging o既news 美元就挾升, 直至到一個真正的 deleveraging plan 先會有機長升

無定向風到七彩

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價值人：

美元一升, 亞洲危機

正如水流向 high return 的 2000 TMT 一樣

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價值人：

valuation 同 leverage ratio 有關

例如 2007的 leverage ratio 去到 40倍, 2007 好多股的 core PE 去到40倍或以上

價值投資法建基於有 Glass Steagall Act (1933-1999)的年代 而 maximum leverage raio 為12.5x, 亦即是話 valuation 去盡不超過12.5x 太多, 一般來說 6-12倍的 trading range

我們面對的risk就係 Leveraging (20 - 40) / Deleveraging (6 - 12) 的概念之間浮動

即 Deleveraging 趨向極大時 ==> 6, Leveraging 趨向極大時 ==> 40

index-wise 最盡可由 40 輸到 6 即跌85%

有 Glass Steagall Act, 係6-12玩, 你輸o左守幾年會翻身

但有了 leveraging/deleveraging, 假切你在40中招 未來仍係 leveraging你有機翻身, 但你在40中招未來係deleveraging(如 1933-1999的 glass-steagall act)你會永不超生

就算你在 Leveraging的bottom 20 買 但 deleveraging的top只為 12

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價值人：

根據資本充足率8%, 伝統銀行係做最盡12.5X

企業o既評級好難高於銀行, 係就連錢都唔駛借, 企業核心盈利應同佢o既 operating cash-flow 有關, 即 valuation不高於 12.5yrs x operating cash-flow

當毒工廠後, 金融控股的 leverage ratio 高到三四十倍 (之後先有 raise capital去填 tier 1 capital), 從而推高企業的valuation去到 30-40倍

Leveraging / Deleveraging 係兩個完全唔同o既年代, 保守者係唔會接受minimum loss (20 ==> 12), 更唔好講 maximum loss (40 ==>6)

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u5p：

股價跌, 通常債價升, 因為投資者要 flight-to-safety, 股債價格同時跌, 是極不尋常現象

債券泡沫爆破步驟

1. 債券供過於求 (老美喺咁發債, 阿爺, 日本仔冇錢再買, 或者唔敢再買)
2. 債價下跌, 債息上升
3. 國債息上升, 公司, 銀行債息跟住上升
4. 整個經濟借貸成本極高
5. 為咗比美債高息, 企業只好沽售非債券資產, 股票, 外幣, 商品等等
6. 美元上升, 通縮加劇

投資自然美之旅 by 樊仲然﹝轉載﹞

引用自：http://www.xanga.com/home.aspx?user=consilient_lollapalooza December 10, 2007

今日終於沽清自然美，自2006年８月至今，15個月。持股時間很短，但股價已由0.63升至2.35了。

問：為何那麼快賣出？
答：價值投資可以獲得高於市場平均的增長，一方面由於在投資公司時，該公司的自然價值增長的部份，另一方面則是股價低估，而後來價值被反映，甚至被高估的部份。往往我在買入公司的時候，都是看中由這兩方面構成可觀的潛在升幅及內含較低的風險。如果股價大幅上升，價值已被反映，甚至高於價值，那即使公司表現乎合預期，回報也只能是平凡。高價買人入優質股的悲哀是，即使公司表現理想，投資回報也只是平平無奇；更不幸的是，公司只是略有失手，但股價卻要被砍掉一半。資本市場變幻無窮，溢價可在短時間轉為拆讓。耐心的投資者可只在拆讓時行動，那即使平平無奇的業績，也可能會帶來驚喜。

問：自然美的前景如何？
答：這兩年自然美是在爆炸性增長，原因在於品牌的改造以及中國的消費增長帶動。其實蘇詩琇的業務改造，就是要反映自然美品牌的潛在價值，而她成功了。我相信自然美還會成長著，但要過去大幅削減成本而增加盈利的方法己不可能保持下去。往後，自然美的增長主要來源於銷售額的增長。我對自然美的前景還是十分樂觀。

問：為何對前景樂觀也要賣掉？
答：這是因為投資除了談前境，也要談定價。如果只談前景，那投資就簡單得多了，全買Google及金沙就好。還有的是，我喜歡讓別人賺最後的20%，這也是別人會願意在我手上買股票的原因。

問：自然美的合理價是多少？
答：2007年賺1.8億，給它30倍PE，即54億，加上4億現金，共58億。自然美有20億股，合理價即是$2.9。這是指08年4月業績時的合理價。

問：為何給它30倍PE?
答：自然美的業務模式，可免費，甚至收費地拓展自己的銷售渠道。加上中國的消費的確在增長中。只要人民幣升4%，同店銷售增10%，加上開拓新加盟店年增5%，銷售額年增20%並不困難，加上營運成本固定，俱有營運槓桿效益，每股盈利年增25%不甚困難。用上DCF模型，我想25-35PE是合理的估值。至於為何不是28或者32...我只能說，如果你是十分正確，那就不用那麼準確。如果現價是5pe，那怕合理pe是28, 30, 還是20，也都是很好的投資。

問：怎樣賣掉？
答：主要是分了三次賣掉。最初自然美佔組合的70%，原因是那時自然美被嚴重地低估。今年中期股息也有5仙，全年可能有1亳。然而去年8月，自然美的股價只是0.6-0.7亳。當然，那時誰也不知今年的股息及盈利，這需要基於業務上了解上，作出預測。後來在$1.4以上減持到40%，再到＄$1.8左右減持到20%, 而在最近急升，則完全沽清。

問：為何減持？
答：組合中各股票的比重，是以其Expected Value的相對比例而分配的。因此，組合內其他股票的數量於吸引程度，都會影響著各股的比重。我是會動態調整股數去乎合讓比例。同時，我會對市場風險作出評估從而決定現金比例。以現時而言，我持有30%以上現金。

問：怎樣選擇賣掉的時機？
答：想沽出，而股價在急升的時候。

問：賣掉後，會買什麼？
答：同樣地，如果基於我的了解之上去預測，而能夠帶來數倍升幅的股票。

問：現時在這熾熱的環境，有這種股票嗎？
答：有。現在全球資金泛濫的情況，很難容易地找到被嚴重低估的股票。焦點可放於大型投資者不甚有興趣的行業及公司。我對業績轉型的興趣濃厚，上年買的城市電訊也屬同類。

問：購買業績轉型公司的風險會很高嗎？
答：如果股票已反映業績亳無希望，那失敗了也會是合乎預期，下跌有限，而一旦成功了，則是升幅數倍。我想風險是有，但相對以天價買優質股低得多吧！

問：未來投資最大的風險是什麼？
答：資產證券化過程崩潰以及高通脤。過去三十年，除了美債大量增加，以增加全球美元的供應外，資產證券化為很多不動產流動起來，形成了貨幣的大量增加。無奇不有的各種證券化都產生著貨幣，而貨幣又通過基金化、投資化回流成為資產。這些新增的流動性，追逐著各類的資產類別，如股票、房地產、債券、原材料、黃金以及金融工具等。這個證券化與基金化的平衡，儲存著大量的購買力，以使流動性不至於流向廣泛商品而引至通脤，而僅形成資產價格膨脤。

然而，現時這個平衡已接近危險的程度。對沖基金這貨幣容器已膨脹得十分利害，而且再從銀行體系中透支出大量的購買力，推升著全球的資產價格，同時優良資產早已被追逐到無利可圖，銀行家及對沖基金唯有轉向次級資產。新興市場、對沖基金、利差交易等關鍵詞，無一不是投入資金流入高風險市場而追求回報。問題是，這種證券化／貨幣化、基金化／投資化的過程，雖未必至崩潰，但也要調整的時候，而調整必然是信貨緊縮及資產價格下跌互相連帶著的互為因果。美國的次按問題，只是這個貨幣化－投資化大背景下的九牛一毛。

另外，油價沖上１００美元一桶，豬肉價格上升５０％，房價兩年翻一翻。這己不是單純是資產價值暴升了，而是慢慢形成影響民生的通貨膨脹。通脤是購除能源及食品的，而房屋則以租金來反映。然而，一個人日常的支出最基本不外乎衣食住行，現在食住行竟被通脹數據排除於外，從而合理化投資化的低回報。如果高通脹趨勢形成，低回報的高價資產，要不把通脹壓力交向民生，要不被降低資產的實際回報低，造成資產價格下降。這時，貨幣化－投資化的平衡又會遇上震盪了。

問：如何防範該等風險？
答：回避依賴這平衡才能上升的股票。回避天價資產。回避沒有抵擋通脹的公司。不要槓桿。不要用相對價格的定價方法。

問Checker兄如何跟進公司

原刊於2006.11.12

在九月，checker兄在港股追蹤族分享了一些心得。

i love this game: 很佩服兄跟進公司的能力。小弟正在學習，發現十分費時。

請問兄同一時間跟進幾多間公司？又可否跟大家分享一下心得？譬如說，每日的routine work, 業績公布期的工夫, 分析時的要點，財務報表的重點(是否細緻到看Notes to financial statements)和花費時間，對公司股價的留意等。

小弟先行謝過！

又，一眾同道如有分享，請隨便發表意見，謝謝！

checker:
Dear ILTG and others,

Sorry to write in English, as my Chinese writing takes me too much time. Thank you for your positive comments and I feel that I still have a lot to learn, from you, from the market, and other readers.

I seldom follow in details for big companies, like HSBC, 2628, 2318, 53 and etc. They are well covered and I would take a top-down approach. e.g. I believe PRC finance companies will be good for the coming few years, I just buy and accumulate. I will update the operational data for specific company, e.g. 2628 and 2318.

I am actually experimenting different strategies and trying to widen my knowledge this year. I start to cover more and more companies, and I think it is about 30-60. (However, more coverage does not mean better return. Imagine if you only hold 2628 and 941, you can be very relaxing and beat the market already.) Some sectors or companies do not have a bright future, e.g. 710, 420, and etc., I will put them aside and wait.

I usually go through the reports in details. Checkout red alerts (e.g. A/R, Gearing, Cash on hand, Cash flow), performance (ROE, ROA), assets on hand, staff cost to overall operating cost, CAPEX, earning trend, margin trend, regular core earning trend, management statement, rental cost (for retail), same store sales (for retails), tax rate, ….. It is very time consuming in the beginning but efficiency is built up gradually.

I also monitor sector trend, e.g. on LCD, semiconductor, mobile phone, transportations, ….but not in a consistent way. Information is from newspapers (HKEJ, HKET), official sites on the net, Google new alert service.

Daily routine include: reading HKEJ, HKET, news on the net, annual reports. If I find a stock doing very well recently (FA or TA), I will take more time to performance a FA analysis and news search. I would also pick specific sector, e.g. AV, Paper, Fertilizer, Fast food, and do a comparison in the sector.

Monitoring insider and fund activities is also important in some cases. E.g. #81, #366, #567, the insiders did buy a lot before the share price high flying.

I do not have a consistent way to prepare for result announcement period. I am planning to develop one later.

Currently, most following-ups are not done adequately. I wish more readers could help to track the specific companies and sectors, more information, knowledge, skills, ideas can be shared across.

I am looking forward to your ideas and comments!

i love this game:
Brother checker,

Thanks for your sharing. Your study is so detailed. You and Brother Maple Leaf are both very hard worker! A very good example to learn.

I always want to work in the market-related field. Now, most of my leisure time is devoted to the market. I am studying CFA level 1 and found the syllabus a good complement to my knowledge. Besides the study, my daily routine includes reading HKEJ, ETnet news, running scanners to 'see' the market. I enjoy reading, and have many investment books rest unread in the bookshelves. Recently, I am trying to devote more time to studying industries, companies instead of reading books. Industry is really hard to study!

I agree with brother sanfords' view of investing into China excellent companies. Many investors, local or foreign, take this view. Stocks with China factor take higher priority in my study.

I also like 'growth' companies, as everyone does. In reality, growth is hard to archieve and cheap real growth companies are hard to find. I think real growth companies in panic sell-off or after intermediate term correction provide good opportunities. The problem is without in-depth knowledge of the companies and the industries, it is hard psychologically to buy in such environment.

My analysis skill is still naive and need to learn more from you.

金融眾生相 by 樊仲然﹝轉載﹞

財務顧問：我不會容許基金兩季表現不好，讓客人看見表現差，咁佢咪會走？點同佢解釋好呢？不如叫佢賣左佢算吧～

基金經理：唉，連續兩季表現唔好，就咁多人Redeem，我們的表現現在跌到榜尾了。價值投資有什麼用，在好的時候Underperform，差的時候又冇人投資，對AUM毫無幫助。我地咁多Cash，咁少Idea，咁唔掂喎，我想我要買一點Bench的股。如果加上一些合潮流的股，只要我們可以行動得快的話．．．

財務顧問：現在印度及中國增長強勁，你考慮一下這些計劃吧．．．之前那些價值投資基金，不如都轉到中國增長基金，好嗎？只是一點點費用吧了～
羊太：對啊，中國會增長強勁～我買！
財務顧問：（真好～又成交了～嘻嘻）

價值投資基金：什麼？又Redeem？那我們要賣出我們的持股了！否則準備金會不足。唉，現在的價錢已經夠低．．．趕不切了，沽下去吧！
價值投資基金分析員：對不起！我要辭職了．．．我們上年的Bonus只有三個月．．．中國增長基金出了３０個月．．．現在佢地出兩倍人工．．．對不起，我需要生活．．．再見～

中國增長基金經理：哈～我們的股票又升了～
中國增長基金分析員：老闆，我想我地既持股很多都升到很高了，我想係時候要減持一點，持些現金，或買一些比較有價值的股，例如美國出口股，它已經很低殘了，很難輸～
中國增長基金經理：我們做既係生意！我們收既係固定百分比！不要緊的，反正全部人都在跟我們一樣，要調整就一齊調整吧～現在買那些賤價的股，輸給別的增長基金怎樣辦？照我想，我們應該捕捉升勢～現在新入來的資金很多，正好～我們可以再把我們的持股股價推高～那今年我們便發財了～
中國增長基金分析員：在這高位還要買那麼多？那我們怎樣賣出？業績出的時候怎樣辦？
中國增長基金經理：不用怕，只要我們做得好，繼續入資金入黎便可～業績方面，讓我跟投資銀行談談吧～佢地知點做。現在大家都在做這種事，我們只是其中之一，要走，應該唔難既～

大行言論：ｘｘ基金增持中國概念股飛天控股至９％，同時ｘｘ報告指前境樂觀，受惠於中國增長，業務強勁，目標價上調至＄１０

散戶甲：這報告真是詳盡，我早就說中國強勁吧～現在升了～我今年不是賺很多，只是３倍．．．近來，那香港零售股只升２０％，真垃圾！
散戶乙：你買的股很貴了，你還要買？還有呀，你那股是什麼，你有研究嗎？佢之前又供股又配股，個老闆出面又有咁多business，依家做ｄ低檔野都賺咁多，你唔怕嗎？
散戶甲：你識什麼？你那些投資又點呀？價值投資，你估你係巴菲特咩？講真，你上年有幾多回報丫？
散戶乙：只有３０％．．．（或許．．．我先賣手上的悶股．．．到中國概念少賺一轉吧．．．）

財務顧問：你考慮成怎樣？
羊太：我分析過你的報告，我覺得很合理！陳師奶佢那增長基金也賺了很多，我唔貪心，只想買一些可以每年賺３０％左右，你想怎樣？
財務顧問：那讓我跟你解釋這能源基金．．．因為石油是有限的，而中國．．．
羊太：（你講乜呀，咁鬼複雜．．．總之，即係前景好就得啦）對，我之前也分析過，你幫我轉去買那能源基金吧～

記者：上次你講那價值股唔掂喎，都唔升既！喂，仲有咩好料？唔好再俾ｄ垃圾料黎～
分析員：哎吔，我都係被人害，被老闆叫左我去照肺呀．．．依家ｄ中國及能源咁hot，你不如試下吧～（嘻嘻，也替我推高它們吧！）
記者：這個掂！很多人都有買佢地，實好多人睇！（交倒貨就得啦～)

散戶甲：看來我的分析很正確！頂，但只買得咁少，我應該再加碼！
財務顧問：噢，你要加碼吧～（很好很好～）早叫你吧～現在知道我的推介不錯吧～我替你辦吧～

分析員：我發現了這好股，你看看～我想寫這～
投資策略師：．．．我明白，但這股在下跌中．．．
分析員：這正是買的時候，台灣經過多年的下跌，差不多要復蘇了，我們先寫金融股，然後再．．．
投資策略師：你現在還很後生，不明白。你現在寫這些，有誰會喜歡看呢？我們的客戶買了，但股票未反彈，或者繼續下跌，我們怎樣跟他們說呢？
分析員：那怎樣辦？
投資策略師：你繼續寫我們的中國概念股吧～我上次給了你其他行的報告，你參考他們便可以了～改一下個Terminal Growth，寫Buy～你照做就可以了～未來有你好處．．．

分析員：我們不如買一些這間銀行，之前雙卡風暴的影響，應該反映在股價上了，你看，跌了５成多了～
基金經理：我們今年的表現已經一般，還加上這下跌中的股，那年尾怎樣辦？不如這樣吧～等那股止跌升彈，確認升市後，我們才衝入去！
分析員：那不是技術分析嗎？但我們是價值投金資基金
基金經理：你還是不明白．．．（抵你做極都係分析員！冇得救！）

紙業公司甲：現在我們的股價很高，佢地果然履行承諾．．．約那Banker，上次我們討論集資的事，可以傾一傾了．．．只要我們可運用資本市場的力量，那我的對手便有難了～哈哈哈～

廢公司甲：依家咁多人入市，咁瘋狂，我地冇理由錯過這賺大錢的機會吧～上次阿Joe話注入資產，改名炒上，再配股的計劃十分有趣～如果成事，大家的待遇不會很差的～只要現金入倒我地既公司，未來便大把方法了～

引用自：http://www.xanga.com/home.aspx?user=consilient_lollapalooza Wednesday, February 07, 2007

What makes the stock go up and down?

It is a joke to provide advice based on valuation only. We are not valuers! Damn funny place.
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Jack Schwager: What kind of analytical approach did you use in evaluating stocks?

Stanley Druckenmiller: When I first started out, I did very thorough papers covering every aspect of a stock or industry. Before I could make the presentation to the stock selection committee, I first had to submit the paper to the research director. I particularly remember the time I gave him my paper on the banking industry. I felt very proud of my work. However, he read through it and said, ‘This is useless. What makes the stock go up and down?’ That comment acted as a spur. Thereafter, I focused my analysis on seeking to identify the factors that were strongly correlated to a stock’s price movement as opposed to looking at all the fundamentals. Frankly, even today, many analysts still don’t know what makes their particular stocks go up and down.

JS: What did you find was the answer?

SD: Very often the key factor is related to earnings. This is particularly true of the bank stocks. Chemical stocks, however, behave quite differently. In this industry, the key factor seems to be capacity. The ideal time to buy the chemical stocks is after a lot of capacity has left the industry and there’s a catalyst that you believe will trigger an increase in demand. Conversely, the ideal time to sell these stocks is when there are lots of announcements for new plants, not when the earnings turn down. The reason for this behavioral pattern is that expansion plans mean that earnings will go down in two to three years, and the stock market tends to anticipate such developments.

Another discipline I learned that helped me determine whether a stock would go up or down is technical analysis. Drelles was very technically oriented, and I was probably more receptive to technical analysis than anyone else in the department. Even though Drelles was the boss, a lot of people thought he was a kook because of all the chart books he kept. However, I found that technical analysis could be very effective.


From: Jack D. Schwager, The New Market Wizards, Harper Business, 1994, p.191.

Never let your fire off!

Jesse Livermore’s Trading Method

first published on 2008.02.07

In his book "How to trade in stocks", Jesse Livermore, a famous speculator in the early 20th century and “the great bear”, discussed his trading method. Though Livermore died broke, we can still benefit from his forty-odd year experience in Wall Street. He emphasized to trade an unstoppable long-term trend and to get in somewhat near the beginning.

“Real movements do not end the day they start. It takes time to complete the end of a genuine movement.” p.29

“It has always been my experience that I never benefited much from a move if I did not get in at somewhere near the beginning of that move. And the reason is that I missed the backlog of profit which is very necessary to provide the courage and patience to sit through a move until the end comes-and to stay through any minor reactions or rallies which were bound to occur from time to time before the movement had completed its course.” p.46

Though Livermore was famous for his tape-reading and was regarded by many people as a technical trader, I think he was virtually a “techno-fundamentalist” as he digested lots of fundamental and market information in his normal trading days. After forming an opinion about the market or a particular stock, it is the TIMING he wanted to discuss in the book. Many of us probably have the experience of getting nothing out of the market though our opinion on the market direction was right. Maybe we get in the trend too late or we are scared out by a vigorous reaction. In the worst case we may have same experience as Jim Rogers’, who in 1970 shorted a stock at 48 and had to cover the position when the stock went up to 72. The stock eventually went up to 96 and then down to 2. Right but lost! Seems familiar? How could Livermore recognize the trend beginning?

“I determined to eliminate all the minor movements.” p.82

“I wanted to find out what constituted the beginning of a Natural Reaction or a Natural Rally. So I began checking the distances of price movements. First I based my calculation on one point. That was no good. Then two points, and so on, until finally I arrived at a point that represented what I thought should constitute the beginning of a Natural Reaction or Natural Rally.” p.83

There are around 20 pages in his book detailed his method. Here we only outline his idea and use the following figure as an example:



1. Up Trend: Suppose the stock is rising and we become bearish on the stock owing to some fundamental reason. We should not short at this stage and should wait for a better opportunity to short. At this stage, we only record the closing price in a column named “Up Trend” when it is higher than the last highest closing price.

2. Natural Reaction: How to eliminate minor movements? Livermore use DISTANCE to remove minor movements. If the stock closes significantly lower than the last highest closing price, it is in the Natural Reaction Stage. My definition of “significantly lower” for HSI is 10% of the last highest closing price in the column “Up Trend”. In this stage, we record in a column named “Natural Reaction” only when the closing price is lower than the last lowest closing price.

3. Natural Rally. When the stock closes significantly higher than the last lowest closing price in the column “Natural Reaction”, it is in the Natural Rally Stage. Now we have 2 pivotal points, the highest closing price in “Up Trend” and the lowest closing price in “Natural Reaction”. The price action around pivotal point deserves scrutiny. In this stage, we record in a column named “Natural Rally” only when the closing price is higher than the last highest closing price.

4. Livermore suggested shorting when the test of the highest closing price in “Up Trend” fails. My Definition of test failure for HSI is it closes around 5% lower than the last highest closing price in the column “Natural Rally”.

The above is only a simplified version of his recording method. His recording sheet consists of 6 columns, namely Up Trend, Down Trend, Natural Reaction, Natural Rally, Secondary Reaction and Secondary Rally, and handles many more scenarios, such as test success, fake test success etc. The following is my record of HSI using JL’s method. The minor movements were eliminated as illustrated.

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引用自：http://sports.sina.com.cn/z/samsung2007/photo/50510/index.shtml